Investment in equipment has increased, but construction investment continues to struggle. According to the July industrial activity trends released by the national data agency on August 31, equipment investment rose significantly, while construction orders fell by more than 30%. Consumer spending also declined, indicating a lack of clear recovery in domestic demand. Although manufacturing output increased, inventory levels rose even faster, suggesting that the production gains are not translating into broader economic growth.
According to the national data agency, equipment investment increased by 7.5% compared to the previous month and was up 24.9% from the same month last year. The rise in equipment investment was driven by increases in machinery and transportation equipment.
In contrast, the construction sector continued to show weakness. Construction orders in July fell by 34.0% compared to the same month last year. Civil engineering orders dropped by 55.0%, while building orders decreased by 23.2%. By type of client, public orders fell by 34.9%, and private orders decreased by 19.7%.
Construction orders are considered a leading indicator of future construction activity. A continued decline in orders could eventually impact construction output.
Indeed, construction output in July decreased by 3.2% compared to the same month last year. While building output fell by 5.5%, civil engineering output increased by 4.4%. This indicates mixed trends within the construction sector. Compared to the previous month, construction output declined by 1.1%, with building output down 7.4%.
Consumer spending also showed weak recovery. Retail sales in July fell by 2.4% from the previous month and were down 0.8% compared to the same month last year. Notably, sales of durable goods, including automobiles and electronics, decreased by 7.7% from the previous month, contributing to the overall decline in retail sales.
This decline reflects a base effect from June, when sales of durable goods, including automobiles, surged. The data agency explained that improvements in parts supply in June led to increased automobile production and sales, resulting in a contrasting effect in July.
In the manufacturing sector, both production and inventory levels increased. Manufacturing output rose by 3.9% compared to the same month last year, driven by increases in automobile and machinery production.
However, manufacturing inventory also increased by 6.4% compared to the same month last year. The inventory rate rose to 97.2%, up 3.4 percentage points from the previous month. This suggests that while production has increased, shipments have not kept pace, leading to greater inventory pressure.
Investment showed a positive performance, particularly in equipment investment, which saw increases in semiconductor manufacturing equipment as well as transportation equipment like aircraft and ships. However, the increase in equipment investment has not yet clearly spread to other domestic sectors such as construction and consumer spending.
Lee Doo-won, a senior official at the national data agency, commented on July's industrial activity, stating, "It was adjusted due to the base effect from the previous month. While production and consumption have seen some adjustments, investment has shown a favorable trend, particularly in equipment investment."
* This article has been translated by AI.
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